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The Modi government will keep wheat prices stable by not changing the import duty, ensuring ample stock, and monitoring the market.
The central government has decided not to change the import duty on wheat. This move aims to keep wheat prices stable in the country. Even though there has been record production of wheat, rumors suggested that wheat prices could reach around Rs 3000 per quintal by winter. This expectation led many farmers and traders to hold back their wheat stock. However, the government's decision is likely to prevent a sharp rise in the prices.
The government has assured that there is a sufficient stock of wheat. Despite distributing free wheat to 80 crore people, the country still has plenty of wheat left. There will be no wheat crisis. The government is confident that wheat prices will not rise significantly.
In India, the average price of wheat is between Rs 2400 and Rs 2600 per quintal. On the international market, wheat prices are lower. For instance, wheat on the Chicago Board of Trade (CBOT) is priced at $6.84 per bushel (Rs 21,000 per ton), and Russian wheat costs about $235 per ton (Rs 19,575). If imported, adding 40% import duty and freight charges makes it more expensive than Indian wheat. Hence, some groups have requested to reduce the import duty to zero, but the government has refused this request.
The Modi government's third term has a 100-day agenda that includes controlling food grain prices. Up to June 11, 2024, the government procured 266 lakh metric tonnes of wheat from farmers at the minimum support price (MSP) of Rs 2275 per quintal. The government needs 184 lakh metric tonnes for public distribution and welfare schemes, and it has sufficient stock to meet this requirement. The Department of Consumer Affairs, Food, and Public Distribution is actively monitoring market prices and will act against hoarding to prevent price hikes.
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The decision not to reduce the import duty is intended to protect Indian farmers. Reducing the import duty would allow business groups to import cheap wheat, forcing local farmers to sell at lower prices. This could lead to future price manipulation by these groups. Keeping the import duty unchanged ensures that wheat prices remain above MSP, benefiting farmers.
Some market players believe wheat prices might still rise, predicting wheat flour prices to reach Rs 28 to Rs 31 per kg in the next 15 days, and wheat prices to reach Rs 2800 to Rs 3000 per quintal by winter. The Roller Flour Millers Federation of India has also requested the government to allow zero-duty wheat imports.
The central government states that wheat production in the country exceeds demand. While the annual consumption is 1050 lakh metric tonnes, the current season is expected to produce a record 1129.25 lakh metric tonnes. As of January 1, 2024, the wheat stock was 163.53 lakh tonnes, well above the buffer standard of 138 lakh metric tonnes. Wheat stocks have never fallen below the required buffer stock levels.
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With a sufficient stockpile and stable market strategies, the government ensures that wheat prices will not increase dramatically. If the monsoon season brings good rain, there will be better sowing in the Rabi season, further stabilizing wheat prices. However, less rain could lead to a price rise. For now, farmers are advised to stay informed and make selling decisions accordingly.